Energy Market Update: June 2016

Alberta

In mid-June, the Alberta Energy Regulator (AER) introduced a new regulation, part of which governs companies looking to buy and sell assets, stating that they will have to meet a new and higher threshold for proving their financial capabilities for cleaning up old wells. The new rule was put in place to prevent oil and gas companies from declaring bankruptcy without cleaning up and remediating old wells like Redwater Energy Corp. recently did. The rule helps protect Albertans from facing the financial liability of cleaning up these “orphaned” wells. However, the rule has been met with an outcry from critics who claim that it could force some companies into bankruptcy. A team of AltaCorp Capital analysts wrote a report stating that the new rule could have “the unintended consequences of potentially accelerating bankruptcies” which would cause “and influx of well[s] enter[ing] the (Orphan Well Association) fund”. Currently, only 28 per cent of energy companies in Alberta meet the new standards. In light of these concerns, the AER has agreed to relax a part of the rule and examine situations on a case by case basis. Jordan Fitzgerald, a spokesperson for AER, said that deals that have already been announced could be allowed to proceed if the company in question is operating in good faith, and demonstrates the ability to cover their liabilities. (Source: Financial Post)

Electricity Prices for Alberta

The Alberta power pool price averaged 1.544 cents per kWh in June 2016. This price is 0.045 cents higher than last month’s average of 1.589 cents per kWh. The pool price has averaged 2.007 cents per kWh over the last 12 months.

As of June 6, 2016, the forward market was predicting electricity prices for the calendar years of 2016, 2017, 2018, 2019 and 2020. These prices are 3.58, 3.65, 4.675, 5.213, and 5.5 cents per kWh respectively.

Gas Prices for Alberta

Direct Energy’s gas rate for June was $1.374 per GJ in the North and $1.374 per GJ in the South. The May rate has been set at $0.795 per GJ in the North and $0.795 per GJ in the South. Alberta gas prices have averaged $2.149 per GJ over the last 12 months.

As of June 1, 2016, the forward market was predicting gas prices for the calendar years of 2016, 2017, 2018, 2019, and 2020. These prices are 2.14, 2.75, 2.92, 3.08, and 3.21 cents per GJ respectively.

British Columbia

The Energy Forum, a group of 16 business and environmental groups, have written an open letter to Premier Christy Clark encouraging the British Colombia government to implement the 32 recommendations made by the Climate Leadership Team (CLT) last fall. In the letter written by the Energy Forum, which includes Alterra Power, the BC Sustainable Energy Association, Clean Energy Canada, the David Suzuki Foundation and the Pembina Institute, they claim that British Colombia has had the highest emission growth of any province with an increase of emissions equivalent to adding 500,000 cars to the roads between 2010 and 2014.

A Pembina Institute report released recently, shows that the current environmental and climate efforts in British Colombia are far less effective than that of Alberta, Quebec, and Ontario. According to the report, emissions are projected to decrease by 26 per cent in Alberta, 23 per cent in Quebec and 22 per cent in Ontario while in the same period, emissions are expected to rise by 39 per cent in British Colombia. The Energy Forum is encouraging the provincial government to introduce an action plan that will put BC back on track for its 2050 environmental and climate targets and in line with the other provinces. The BC government is expected to announce their new climate plan by the end of June 2016 with consideration of the recommendations made by the CLT. (Source: BC Business)

Ontario

Residents of Thunder Bay are rallying with Keep Hydro Public to oppose the sell-off of one of Ontario’s most crucial public assets. Jules Tupker, a local activist, explains that residents fear an increase in bills and a loss of revenue for the provincial government if Hydro One becomes privatized. Tupker explains that many residents wouldn’t be able to face another financial hit from an increase in the price of electricity which will by extension increase the price of commercial goods as well. The Keep Hydro Public campaign reminds residents that it’s not too late to keep it public since 70 per cent of Hydro One is still public and owned by the people.

Heather Stowell, a member of the Thunder Bay’s Council of Canadians, hopes that the elected MPPs will appropriately represent the people that have elected them and listen to their wishes to keep Hydro One public. Stowell explains that the majority of the residents in Ontario are opposed to the privatization of Hydro One and she hopes that they can turn their opposition into action to influence Premier Wynne from “making a huge mistake that will be extremely detrimental to [Ontarians] daily lives”. Currently the Keep Hydro Public campaign is backed by over 20 communities across the province and various groups including labour, environment, anti-poverty, and student organizations. (Source: Net News Ledger)

Electricity Prices for Ontario

The Hourly Ontario Energy Price (HOEP) was an average of 1.542 cents per kWh in June 2016. This price is 0.341 cents higher than last month’s 1.201 cents per kWh. The weighted-average price was 1.339 cents per kWh during May 2016. The twelve month average was 1.623 cents per kWh up to June 2016.

The first estimate for the Global Adjustment rate for June 2016 was set at 11.650 cents per kWh. This actual rate paid was 10.749 cents in May 2016. The Global Adjustment is an additional charge paid by non-regulated customers. (Source: IESO)

Saskatchewan

The NDP is raising concerns about the government’s carbon capture facility after SaskPower renegotiated its contract terms with Cenovus energy. The renegotiation occurred after there was a delay in the completion of the project, which would have amounted to a $91.2-million penalty for SaskPower. The original contract stated that Cenovus was to take a million tonnes of CO2 emissions per year which would have added up to $25 million in revenue for SaskPower. The new contract specifications were not released and so it is not known how much CO2 emission Cenovus is now required to take but it is lower than the original amount. Mike Marsh, the president of SaskPower, assures that it is more than 50 per cent of the plants potential output. However, currently the facility is not operating at its full potential, and so not making its full potential revenue, because they do not have enough buyers for all of the CO2 that could be produced. Marsh says that he was not involved in the renegotiation and did not know why the penalty was so high. He defends the renegotiation claiming that $91.2 million is a lot of money that SaskPower did not have to pay thanks to the renegotiation and so it is “all behind [them]”. (Source: CBC News)

Manitoba

KRISTIN ANNABLE / WINNIPEG FREE PRESS Canadian Centre for Policy Alternatives releases a report on the Energy East pipline, which says it won’t have a positive economic impact on Manitoba.

In the midst of negotiations for a pipeline to transport oil from western Canada to eastern Canada, two separate reports have been released encouraging Manitoba to focus less on fossil fuels and more on green energy. The Canadian Centre for Policy Alternatives, who have been highly critical of the proposed pipeline, have released a report claiming that the economic benefits of the Energy East pipeline “do not outweigh the cost to the environment, danger to Winnipeg’s drinking supply or potential loss of life caused by the pipeline explosions”.

The Errol Black Chair in Labour Issues and one of the authors of the report, Lynne Fernandez, said that by investing in alternatives to fossil fuels, Manitoba could create 40,000 full-time jobs over a 15 year period if the province follows Manitoba Hydro’s demand-and –Supply management strategy. In contrast, the Canadian Research Institute says that the Energy East project could create 32,000 full-time jobs over 25 years. The second report, written by Clean Energy Canada echoes the thoughts of the Canadian Centre for Policy Alternatives adding that Manitoba is in a position to be a leader in renewable energy in Canada due to Manitoba Hydro. Both reports argue that oil is becoming the energy of the past and so Manitoba should move towards clean energy sources which is where the industry and the country are headed. The pipeline is planned to run underneath Winnipeg’s aqueduct which out their drinking water in danger. Sustainable Development Minister, Cathy Cox, assures that the government will “protect Manitobans”. The application for the pipeline is done and is now in the process of the 21 month review process. (Source: Winnipeg Free Press)

New Brunswick

A new brewery in New Brunswick has taken its production off the grid. Off Grid Ales, started by Randy and Denise Rowe is run out of their solar-powered home on Harvey Lake. They have been living on their property, which is in an isolated area far away from the nearest power pole, for seven years, relying on solar and wind to power their home. In order to avoid the high costs that come with producing electricity, the Rowe’s have ensured that their production is as energy-efficient as possible so they can run it at a fraction of the cost of a regular brewery. They do use a propane heating system to ensure their brews are consistent but the rest of their production is run by 18 solar panels and one wind turbine. The Rowe’s plan to have their beers, including a red and a double IPA, on shelves by this fall. (Source: CBC News)

The Off Grid Ales brewery is located on Harvey Lake, kilometers away from the nearest power lines. (Shane Fowler/CBC)

During the East Coast Energy Conference to discuss the Energy East project, which would see crude oil transported from Alberta to New Brunswick, a group of environmental activists held their own conference to urge the New Brunswick government to introduce a carbon tax. The Clean Energy Summit was put together to help spread their ideas about creating a new government department called RenewNB to manage a new $20 carbon tax investment plan. Chris Ruse, the founder of New Clear Free Solutions, came up with the carbon tax and investment plan which would see the money made from the new tax invested in renewable projects. He says that the compound interest will help multiply the money as it is reinvested into public companies and will make a lot of money off of a small tax. With the help of economists and professionals, Ruse is developing his idea further so he can officially present it to the province. (Source: CBC News)

Prince Edward Island

PEI is one of the wind power leaders of the world. Currently, 25 percent of the electricity in PEI is produced by wind power. The change towards wind power came 10 years ago, when the PEI government came up with a plan to wean off of their primarily diesel grid which was becoming increasingly expensive. Due to the landscape of PEI, hydro-electricity and non-renewable resources are not viable option for the island and so they turned to wind power which the province had plenty of. Today the province has a wind capacity of 204 megawatts while their average demand is only 200 megawatts and their winter peak demand is 260 megawatts.

These days Diesel generation provides only 1 per cent of the provinces power. However, the province sells the majority of their energy to New Brunswick through underwater power cables because it generates revenue for the province. They can produce 1 kilowatt hour for 5 cents and sell it off to New Brunswick for 8 cents, generating approximately $20-million a year in revenue. Currently PEI is in the process of developing a new energy strategy and are looking at potentially introducing solar power to their grid to help supplement the wind generated power during peak hours. They are also looking for ways to store the energy they generate since the majority of their wind power is generated in off-peak hours such as overnight. PEI already has energy efficient programs in place to help improve energy efficiency but are striving to keep pushing the envelope in clean energy and energy efficiency. (Source: Huffington Post)

Quebec

In the next 15 years, Hydro-Quebec hopes to double their revenues by exploring the international market and working with foreign-based companies who require data centres. Hydro-Quebec already has data centres set up with companies such as Microsoft, Amazon, and Ericsson which require a lot of energy to cool their servers. Although Hydro-Quebec has not been in the international market since the early 2000’s, they are working towards re-entering it by meeting with potential partners in South America and China. They also plan to expand its services into Ontario and the Unites States, specifically New York State and the New England area. In addition, Hydro-Quebec hopes to increase their customer satisfaction to over 90% and invest $18.1-billion in economic expansion by 2020. For their customers, Hydro-Quebec plans to keep rate hikes to no more than the inflation rate. All of these goals were outlined in Hydro-Quebec’s five-year strategic plan spanning from 2016 to 2020. (Source: Montreal Gazette)

Newfoundland & Labrador

The government of Newfoundland and Labrador has introduced a new gas legislation to help work towards improving their carbon emission. The legislation is aimed at onshore industrial emissions and includes flexible carbon pricing. Environment Minister Perry Trimper says it was important for the legislation to strike a balance of taking some action towards reducing emissions while not blunting the competitive edge that is so important to manufacturers and the province. It will take at least 2 years for the province to track emissions to finalize the legislation and put in place the benchmarks that will be used moving forward. Once the limits are set, it is expected that onshore companies who release more than 25,000 tonnes per year will have to reduce their emissions. Although there is currently no carbon tax in place, Trimper says that one may be added in the future. Trimper also emphasizes that in order for them to be able to reach their reduction targets the work “needs to be done with the industry and not to the industry” which means they will work with companies in the province to achieve the best results. The province had set a goal to reduce their 1990 emissions by 10% by 2019, but even with the added legislation they are not currently on track to achieve this goal. Off-shore sites are jointly owned with Ontario and they have begun talks with the provincial government to reduce pollution in those sites as well. (Source: CTV News)

Nova Scotia

The Nova Scotia government approved the installation of 2 five-story tall, 1,000-ton steel turbines in the Bay of Fundy’s Minas Passage. Although the project is approved, the Bay of Fundy Inshore Fisherman’s Association has voiced their concerns over the damage that it could cause to the wildlife and environment in the Minas Passage. Colin Sproul, a fifth generation fisherman and spokesperson for the association, said that the project was developed without the consultation of key stakeholders and he believes that the turbines will become “killing machines on the floor of the most fertile and ecologically sensitive area in Canada”. Sproul believes that the Minas Passage should never have been given the green light as the turbine test site because it is home to numerous at risk species.

The area is a breeding ground for lobsters and other marine life which bring in a combined $750 million per year. The Fisherman’s Association is spearheading a coalition to stop the project from proceeding with the support from fishing and environmental groups, and First Nations communities who are all concerned for the safety of the environment in the Minas passage. Sproul stressed that the association is not opposed to tidal power or renewable energy, but they believe that the location of this site is a poor choice and will ultimately damage the environment and the natural resources that help contribute to the province’s economy. The federal department of Fisheries and Oceans has stated that the current assessment of the marine life in the passage was improperly done and “grossly inadequate” which means that future assessments of the impact of the turbines would be ineffective. (Source: News Wire)

Nunavut

In 5 Nunavut communities solar power is a viable energy option to cut fossil fuel consumption by up to 50 per cent. The World Wildlife Fund Canada conducted a study on 300 northern communities who rely solely on diesel generated electricity but who now need to replace and upgrade their generators. All of the aging generators emit greenhouse gases and black carbon which speed up the melting of sea ice. They are also expensive to run, will be expensive to replace and some are running at capacity which is unsustainable for growing communities. Renewable energy is a feasible alternative to diesel and in the community of Colville Lake NWT, for example, they predict that they will soon be able to generate all their electricity from solar panels in the summer months. The province of Nunavut has asked the federal government for $250-million to replace and update their power plants and are now looking at how they can use some of this money to invest in renewable resources such as solar power. Claudio Canizares, one of the writers of the study, states that replacing all of the diesel generation in Nunavut is still too costly but he suggests beginning the transition in the communities, like Iqaluit, that would have the largest benefit while keeping costs reasonable. The Nunavut government is interested in pursuing these alternatives going forward. (Source: CBC News)

Northwest Territories

Photo Source: CBC

A report, entitled the North Slave Resiliency Study, has stated that diesel is still the cheapest and most effective backup if the territory’s hydro system fails. Although the territory wished that more clean and sustainable options were the better alternative, diesel is still the only option that won’t affect the cost for consumers. This study comes after back-to-back low water years in 2014 and 2015 which affected the hydro output and led to an increase in burning diesel to compensate.

Usually, the hydro system has enough capacity to meet their needs and so supplementing the hydro power with renewable resources would be a waste in energy and would lead to no savings. According to the report, wind power could save up to $37-million within the next two decades however, it would cost the territory $97-million to install which means that overall it would still cost the territory and the consumers $60-million. Both solar and biomass options lead to the same conclusions but liquefied natural gas could be a slightly cleaner and greener alternative. Over the past two years the territory has had to request $60-million in subsidies to help cover the cost of the addition diesel that had to be burned during the low hydro years to ensure that consumers did not have a substantial increase in their rates. Going forward the province will likely create a “rate subsidization fund” to “squirrel” away money saved during profitable hydro years to be used to cover diesel funds in lower hydro years. This would help them avoid another government bailout or rate rider for their consumers. The territory is also looking to renovate the Bluefish dam which will help add some extra capacity to their hydro system. (Source: CBC News)

Yukon

Yukon Energy is preparing to start an $80-million project to replace the transmission line to Keno City. Andrew Hall, the president of Yukon Energy, said that the current transmission lines are at the end of their life and need to be replaced in order to provide reliable energy to the community. The project includes replacing 112km of transmission lines as well as expanding and upgrading substations along the way. Although there are only 20 customer in Keno City, Yukon Energy has an obligation to serve them. Yukon Energy is also looking forward to potential future projects and mining development that would require this upgrade to be completed. The Yukon Environmental and Socio-economic Assessment Board has recommended approval and so the project could be allowed to start by later this year. Yukon Energy is preparing to be “shovel-ready” for when they receive funding so they can start as soon as possible. (Source: CBC News)